By Todd Neeley
DTN Staff Reporter
OMAHA (DTN) -- The public has until Thursday, Aug. 31, to have its say on the recently proposed Renewable Fuel Standard volumes from the U.S. Environmental Protection Agency. The total number of comments posted to regulations.gov hit 35,637 as of Tuesday.
The agency is taking heat for a proposed reduction in cellulosic biofuel volumes and for not increasing biomass-based biodiesel volumes to match expected production. EPA is also being asked to change the point of obligation from refiners and importers of gasoline and diesel to ethanol blenders.
The EPA originally proposed a much higher cellulosic ethanol number in its RFS proposal sent to the Office of Management and Budget in June.
DTN reported exclusively last week that interagency review documents show the EPA originally called for 384 million gallons for the cellulosic Renewable Volume Obligation, or RVO, which would have been an increase above the 311 million gallons in 2017. To read the full story, visit: http://bit.ly/…
The June 23 version of the draft rule, however, set that number at 238 million gallons, making the total volumes in the RFS even lower. In the July 21, 2017, proposed rule posted in the Federal Register, the EPA provided a rationale for its decision.
"EPA's projections of liquid cellulosic biofuel, however, were higher than the actual volume of liquid cellulosic biofuel produced in both 2015 and 2016," EPA said.
"We believe that new data warrants a change to the methodology for projecting liquid cellulosic biofuel in an effort to make the projections more accurate. We are therefore proposing to adjust the percentile values used to project liquid cellulosic biofuel production based on actual liquid cellulosic biofuel production in 2016.
"We believe that the use of this methodology, with the adjusted approach to developing the percentile values used to project production volumes for liquid cellulosic biofuels, results in a projection that reflects a neutral aim at accuracy since it accounts for expected growth in the near future, and does so in a way that directly reflects the accuracy of EPA's projections in the most recent year (2016) for which complete data is available."
The EPA now counts renewable natural gas, or RNG, as part of the cellulosic volumes.
An association representing natural gas interests in the Pacific Northwest said in comments to EPA that it opposes the change in methodology for calculating cellulosic biofuels.
The Northwest Gas Association, which represents six investor-owned gas utilities in Idaho, Oregon, Washington and British Columbia and three pipelines companies used to transport gas throughout the region, said in comments the agency underestimates the potential growth of cellulosic biofuels.
"While adjusting the current methodology may be in order, the proposed methodology promises to significantly understate actual cellulosic biofuel production volumes, resulting in a reduction in the availability of D3 and D7 RINS (renewable identification numbers)," NWGA Executive Director Dan Kirschner said in written comments.
"NWGA disputes the notion that the RNG as a subset of the cellulosic bio-fuel market is mature. In our region, it is just getting started. For instance, the city of Portland recently announced plans to collect renewable natural gas from a large wastewater facility. This announcement has inspired interest in similar projects in multiple cities and towns throughout the region."
Such projects, however, may not be possible without an increase in RFS volumes for cellulosic biofuels.
A number of advanced biofuels companies and interest groups have been asking the agency to set the bar higher for cellulosic ethanol and other biofuels, in order to spark investment and production of those fuels.
Instead, the EPA has applied a cellulosic waiver based on inadequate domestic supply. The launch of full commercial-scale production has been slow for a number of reasons, including an E10 market saturated with corn-based ethanol.
"Therefore, NWGA recommends that the EPA adjust the proposed rate of growth methodology to add a factor that accounts for projects currently under construction, or awaiting EPA approval," NWGA's Kirschner said.
"Alternatively, EPA should return to a project-by-project analysis of this emerging industry. The EPA's RIN program has been highly effective in encouraging our industry to move forward, and develop new ways to clean our air. Do not hamper the development of RNG by artificially constraining cellulosic biofuel program."
BIOMASS BIODIESEL
EPA's proposal calls for reducing advanced biofuel blend volumes, including biomass-based biodiesel, of the RFS from 4.28 billion gallons to 4.24 billion gallons. EPA would set biodiesel's RVO at 2.1 billion gallons for 2019, though the industry said it expects to produce volumes upwards of 2.75 billion gallons.
In a passionate plea to the agency to set the biomass-based biodiesel number higher, Troy Shoen, senior marketing manager for Ames, Iowa-based biodiesel producer Renewable Energy Group, wrote about how biofuels have changed agriculture.
Shoen recalled sitting on his grandpa's lap while riding a tractor before the family farm was auctioned off during the 1980s farm crisis.
"I sat on my grandfather's lap in his red International tractor with the white cab, just where I had sat a hundred times before," he wrote.
"But this time was different. This was the last time I would sit here with him. The last smells of dirt and diesel. The last time looking out the stain-covered front window. The last time feeling like I was an American farmer. It was 1985 and this was the day of my grandfather's farm auction."
Shoen wrote about how the value of his grandfather's farm land dropped by nearly 60% and how record corn and soybean production drove prices down.
"At that moment, as I saw my dreams of becoming an American farmer auctioned off by the fast-talking auctioneer, I vowed that if I was ever in a position to help others like my grandfather I would do it," he wrote.
Now, he works for a company that employs more than 700 people in rural America and has become the largest biodiesel producer in the country.
"And most importantly to me, we return $32,823 of profit back to a 1,000-acre farm," he wrote.
"Unfortunately, the biodiesel industry competes against the largest cartel in the world, OPEC, (Organization of the Petroleum Exporting Countries) which although illegal in the U.S., is formally protected by U.S. foreign trade laws. So how do we protect the American biodiesel industry? That was the question that was asked, and subsequently answered, through the Renewable Fuel Standard's setting of Renewable Volume Obligations. Those obligations are needed for this important American industry to compete against the OPEC cartel."
POINT OF OBLIGATION
EPA also received comments from refining interests, many who have asked the EPA to change the point of obligation in the RFS from refiners and importers of gasoline and diesel to ethanol blenders.
EPA has said in its proposal that it would consider such a change at another time.
Tony Dominick, an employee at the Delaware City Refinery in Delaware City, Delaware, said in comments to EPA that his company has been unable to keep up with the costs of complying with the RFS.
"I am writing/calling because my company wasted $360 million last year buying credits called RINs from companies -- including competitors -- who have more credits than they need to comply with the RFS," he said in written comments.
"In other words, they are 'long' RINs. My company is paying hundreds of millions of dollars to comply with the RFS for the fourth year in a row. The financial drain is both unsustainable for my company and damaging to our national energy security.
"EPA's unregulated, non-transparent, volatile RFS credit market incentivizes RIN-long companies to maximize profit and limit competition by hoarding RINs, creating significant volatility, and driving up costs even further."
Public comments on EPA's RFS volume proposal can be submitted here: http://bit.ly/…
Todd Neeley can be reached at todd.neeley@dtn.com
Follow him on Twitter @toddneeleyDTN
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